Luxury brands win European Union court ruling on online distribution

Pop star Rita Ora promotes the Rimmel London range of cosmetics More

The European Court of Justice decided on Wednesday that a ban was "appropriate to preserve the luxury image" of products.

The CJEU was ruling in a case referred to it by a court in Frankfurt, Germany.

The decision stemmed from a case brought by Coty's German unit against one of its retailers, Parfumerie Akzente, which used Amazon to sell Coty products. Coty initially sought to prohibit Parfümerie Akzente's onward distribution of its products via the platform "amazon.de".

"Authorised merchants such as us may sell brand-name products on outward-visible third-party platforms, provided that we meet the conditions that are necessary and reasonable for preserving the luxury image", Chief Executive Kai Renchen said in a statement. But luxury fashion brands are seem to be unhappy with its distributors selling the brand items online without the permission.

European Union competition law generally prevents companies from using agreements which have as their object or effect the restriction of competition. Therefore, luxury goods manufacturers will be able to prevent their products from being sold on third party websites by distributors.

In addition, the CJEU suggests that the Coty clause - even if it violates Article 101 (1) TFEU - may benefit from the block exemption for vertical agreements of EU Regulation 330/2010, as it does not have the object to restrict competition.

The CJEU noted, however, that Coty allows its authorised distributors under certain conditions to advertise the sale of its luxury goods via the internet on third-party platforms and to use online search engines.

The case concerns the selective distribution system of Coty, the leading German supplier of luxury cosmetics. In their ruling, judges confirmed that luxury brands could restrict sales through online marketplaces without breaching European competition rules.

The president of the German cartel office, Andrea Mundt, suggested the ruling's focus on luxury goods meant it would have a limited impact.

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